Question

A) Kayla invested $72,000 into globe life four years ago. Globe life value increased by 0% in 2016, 10.3% in 2017, and -5.6% in 2018 and -8.9% in 2019. what has been her net holding period rate of return

Answer 1

Answer-

Investment amount by Kayla = $ 72000

Investment amount in 2016 = $ 72000 x ( 1 + 0 % ) = $ 72000

Investment amount in 2017 = $ 72000 x ( 1+ 10.3 % )

Investment amount in 2017 = $ 72000 x 1.103 = $ 79416.

Investment amount in 2018 = $ 79416 x ( 1 - 5.6 %)

Investment amount in 2018 = $ 79416 x ( 1 - 0.056 ) = $ 79416 x 0.944 = $ 74968.7

Investment amount in 2019 = $ 74968.7 x ( 1 - 8.9 % )

Investment amount in 2019 = $ 74968.7 x ( 1 - 0.089) = $ 74968.7 x 0.911 = $ 68296.48

The net holding rate of return = [ ($ 68296.48 - $ 72000) / $ 72000 ] x 100 %
The net holding rate of return = (- 3703.52 / $ 72000) x 100 %  

The net holding rate of return = - 0.05144 x 100 %

The net holding rate of return = - 5.144 %

Therefore the net holding rate of returm for 4 years = - 5.144 %